The federal government has approved a comprehensive overhaul of Pakistan’s tax administration system, introducing a centralised digital operating model aimed at reducing human interaction between taxpayers and tax officials while improving transparency and efficiency in assessments and audits.
Prime Minister Shehbaz Sharif has given approval to the New Tax Operating Model, which will be implemented in three phases starting from October this year. The reform is designed to transition the Federal Board of Revenue (FBR) into a fully digital and faceless system, similar to tax administration frameworks used in several developed countries.
Under the new structure, key functions such as audits, assessments, and enforcement will be separated into independent operational wings, all connected through a centralised digital platform based in Islamabad. The objective is to minimize discretionary powers, reduce corruption risks, and enhance overall tax compliance.
Faceless Audit System Introduced
A newly established National Faceless Audit Wing (NFAW) will be responsible for conducting risk-based audits and monitoring through a Central Data Hub. Case selection will be automated using algorithm-based systems, and the entire audit process will be conducted online without physical interaction with taxpayers.
The wing will not have the authority to issue tax demands or carry out recovery actions.
Independent Assessment and Enforcement Wings
The National Assessment Wing (NAW) will handle quasi-judicial responsibilities, including issuing assessment orders, processing refunds, exemptions, and show-cause notices. Hearings under this wing will be conducted digitally, with no involvement in field enforcement or audit operations.
Separately, a Field Operations Wing will oversee enforcement activities such as tax recovery, taxpayer registration, verification, and broadening of the tax base. However, it will not be involved in audits or assessments, ensuring a clear separation of responsibilities.
Officials stated that this structural division is intended to prevent concentration of authority in a single officer, a practice that has historically allowed excessive discretionary control in tax matters.
Digital Taxpayer System and Automation
As part of the reform, a centralised digital taxpayer system will be introduced. Tax returns will be pre-filled using data collected from banks, property records, payroll systems, and other verified sources, significantly reducing manual filing efforts.
A unified taxpayer account will also be created to consolidate tax liabilities, credits, and refunds under a single digital profile, improving transparency and ease of compliance.
Push for Better Compliance and Transparency
The reform comes amid concerns over widespread tax compliance gaps. According to Federal Board of Revenue data, a significant number of individuals with high-value financial activity, including large bank deposits and property transactions, have reported little to no declared income.
Officials believe the new system will strengthen enforcement while also simplifying the filing process for honest taxpayers through automation and time-bound digital procedures.
Digital Transformation of Tax Appeals
In the next phase of reforms, the FBR also plans to shift tax appeal processes into a faceless digital system. This move is part of a broader strategy to modernize Pakistan’s revenue collection framework and enhance institutional efficiency through technology-driven governance.
